Oil and Gas Management: Key Elements to Consider for Providing Assurance of Effective Independent Oversight Page: 3 of 22
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Mr. Chairman and Members of the Subcommittee:
We appreciate the opportunity to participate in this hearing to discuss the
Secretary of the Interior's proposal to reorganize the Minerals
Management Service (MMS) in response to the Deepwater Horizon drilling
rig disaster. The tragic loss of life, damage to natural resources, loss of
livelihoods, and harm to local economies that resulted from the explosion,
fire, and catastrophic oil spill in the Gulf of Mexico have again drawn
national attention to federal oversight of exploration and production of oil
and gas from federal land and waters. Under the current organizational
structure, the Department of the Interior's bureaus are responsible for
regulating the processes that oil and gas companies must follow when
leasing, drilling, and producing oil and gas from federal leases as well as
ensuring that companies comply with all applicable requirements.
Specifically, the Bureau of Land Management (BLM) oversees onshore
federal oil and gas activities, and MMS's Offshore Energy and Minerals
Management (OEMM) oversees offshore oil and gas activities.
Additionally, MMS's Minerals Revenue Management (MRM) is responsible
for collecting royalties on oil and gas produced from both onshore and
offshore federal leases. In fiscal year 2009, Interior reported collecting
over $9 billion in royalties for oil and gas produced on federal lands and
waters, purchase bids for new oil and gas leases, and annual rents on
existing leases, making revenues from federal oil and gas one of the largest
nontax sources of federal government funds.
In recent years, we and others, including Interior's Office of Inspector
General (OIG) have conducted numerous evaluations of federal oil and gas
management and revenue collection processes and practices and have
found many material weaknesses (see app. II for related GAO reports).
Our work included reviews of Interior's oversight practices, operations,
and rules, and our conclusions have been remarkably consistent: the
agency has not done enough to meet the challenges it faces. Others,
including the Interior OIG and a panel of experts convened by Interior
have drawn similar conclusions. As a result, Interior staff are in the midst
of attempting to implement over 100 recommendations spanning the scope
of the department's operations. We acknowledge Interior's efforts to
reassess key oil and gas policies addressing revenue collection and rates
of development on federal lands and waters as an important first step to
address material weaknesses. In addition, the Secretary of the Interior
announced several changes to BLM's leasing process in May 2010.
Because of the recent announcement of the Secretary's proposed
reorganization, we have not conducted a detailed analysis of theseGAO-10-852T Oil and Gas Management
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United States. Government Accountability Office. Oil and Gas Management: Key Elements to Consider for Providing Assurance of Effective Independent Oversight, text, June 17, 2010; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc295017/m1/3/: accessed March 29, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.